The insurance clause in INCOTERMS 2020: The latest stage in its evolution and a progressive development 1980-2020 (Part II)


International Commercial Terms (Incoterms) are a set of international trade rules published by the Paris-based International Chamber of Commerce(ICC), a business-to-business non-governmental organisation. Although established over 100 years ago, Incoterms (one of its most important creations) were not introduce until 1923. However, its leading constituents Free on Board (FOB) and Cost and Insurance(CIF) had existed in British commerce since 1812 and 1895 respectively. Incoterms deal with guidelines on most aspects of international trade and has been regularly updated ever-since and every 10 years from Incoterms 1980. Among the rules is a clause on the parties’ obligations to insure goods against risks while in transit, which first appeared in Incoterms IV-1953.Successive Incoterms (V–VIII) modified and refined the insurance clause in accordance with developments in international trade practices such as: migration from Free of Particular Average (FPA) term and from the older 1946 to the newer from Institute Cargo Clauses version from 1979; containerisation; and other technological advances in transport. These developments necessitated additions of more Incoterms from 6 in 1953 to 14 at the peak in 1990; stabilising to 11 from 2000.The latest is Incoterms IX–2020, which came into force on 1 January 2020. This article traces the chronological evolution and development of the insurance clause in Incoterms over a period of 4 decades: the cut-off starting period of 1980 being the time of significant changes in the clause. Although the insurance clause directly governs only two Incoterms: CIF and Cost and Insurance Paid (CIP) contracts, the article also covers: insurance implications in the other 9 Incoterms; what Incoterms does and does not do; the additional sellers and buyers’ insurance interests; and global policy considerations affecting parties’ export-import insurance that are not covered by Incoterms.